By Lisa Burden, J.D. | Legally reviewed by Melissa Bender, Esq. | Last reviewed August 29, 2023
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Advertisements bombard us from all sides: the internet, search engines, billboards, video, print, and television. They often claim to sell the best products, provide the best service, and have the lowest prices. But are these the beginnings of contracts? Generally, the answer is "no."
However, advertisers are liable for untruthful messaging in their ads. Advertisers must be able to back up specific claims about their product or service. The claims must be provable.
So, while a company may make claims about its offerings, the goods or services are not offered in a contractual sense. Below is a brief overview of advertisements in the context of contract law.
Valid and legally enforceable contracts must show that the two parties agreed to their terms without duress. The agreement must involve an exchange of consideration (something of value). The parties can show they agreed to the contract by demonstrating an offer and acceptance.
There is no set formula for offer and acceptance. Contract law allows people to use whatever format they wish. This means oral contracts are theoretically valid. However, verbal contracts are very difficult to prove in court.
Once these elements and the element of "consideration") are in place, the contract is legally enforceable. This means that if one party does not perform as stated in the contract, the other can sue for monetary damages or to get a court to force the breaching party to perform. Parties also may choose to resolve a contractual dispute in mediation or arbitration.
Generally, courts do not consider advertisements to be offers. Instead, they are an invitation to begin negotiations. This makes practical sense. Consider this example:
Suppose advertisements were offers. Someone who saw an advertisement for "Delicious Apples" could say, "I accept your offer to purchase delicious apples, and if they aren't delicious, I'll sue!" No one would be able to conduct business or advertise products.
There are exceptions. One such lawsuit from the 19th century is still taught in law schools. A company in England advertised in the local newspaper offering to pay 100 pounds to anyone who contracted the flu after using its smoke ball as directed.
The company said it deposited 1,000 pounds at a local bank. A customer, Mrs. Carlill, used the smoke ball. She caught the flu. She sued for the 100 pounds. Carlill's attorney argued that the company should pay because the advertisement was a contract between her and the company.
The court agreed with Carlill. The court ruled that the advertisement was a valid offer because it was clear, specific, and non-negotiable. In addition, the court said the company's claim that the 1,000 pounds deposited at the bank showed an intention to be legally bound.
As the above case illustrates, if an advertisement specifies a particular price, quantity, and time frame, it could legally be construed as an offer. This is important to note, as it's an exception to the general rule that advertisements are not offers. For instance, if an ad states, "We will sell 100 widgets for $10 each to the first 50 respondents," this is an offer because it's specific about the terms.
With the rise of digital platforms, small business advertising ideas have evolved significantly. Today, many entrepreneurs are choosing to advertise their products or services online. This approach allows them to target potential customers with cost-effective ads.
As a small business owner, you might launch a new product on an e-commerce platform and use display ads to drive traffic to your business page. Understanding how an advertisement fits into contract law is essential as digital marketing strategies evolve.
The same rules that apply to print advertising also apply to online advertising. The terms and conditions of your website might constitute a legally enforceable contract if they are clear and specific and the user has an opportunity to agree.
Suppose you run a limited-time promotion for your new product on your business page as part of your digital marketing strategy. The advertisement states, "The first 100 customers to call this phone number will receive our new product for half price." It could be an offer because it is specific, outlining the price, quantity, and time frame.
Apart from specificity, other rules apply. An advertiser cannot make wild claims about its products. In general, advertisements must be true, or at least have a reasonable basis in fact.
Also, ads cannot be deceptive. Advertisers can not engage in "bait and switch" tactics. In "bait and switch," an advertiser entices consumers and then tries to "switch" them to another product.
In conclusion, although small business advertising ideas are vital in reaching your target audience, care must be taken so that a legally binding offer is not created.
Free tools and resources are available to help you craft effective and legally sound advertisements. See FindLaw's Contract Law section to learn more.
Advertisements and contractual offers may differ from a legal standpoint. However, they often intersect in the business world. Social media and an advertising strategy that includes social media ads, such as Google Ads have introduced new legal complexities. It's crucial to understand that while your goal is to attract new audiences and expand your potential customers, how you present your offer can have legal implications.
Ad campaigns try to attract new customers and make conversions using brand awareness and marketing strategy. It pays to ensure you fully understand what you are offering, especially if your advertising strategy includes direct mail or social media advertising such as email marketing, search ads on Bing and Google Search, or social media platforms like LinkedIn and Facebook.
If you are a small-business owner concerned about what constitutes an offer and acceptance, consult with a local contracts attorney. A local business attorney can guide you in avoiding marketing campaigns that turn into unintended contracts.
Contact a qualified business attorney to help you negotiate and craft airtight contracts.
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